Banks barred from sacking CEOs sans BB sanction

The central bank has amended its rules on appointment and removal of chief executive officers (CEOs) of commercial banks, prohibiting their sacking sans its prior permission.
Under the amended rules, the authorities of commercial banks cannot force the CEOs to submit their resignation or cancel their appointment contract without prior approval from the Bangladesh Bank (BB).
Specialised banks, however, would not come under the purview of the amended provision.       
The CEOs will have to inform the chairmen of the boards of directors of the respective banks about the valid grounds for resignations a month before, if they want to scrap appointment contracts voluntarily before the expiry of the agreement, said a BB circular Tuesday.
A copy of the notice will have to be submitted to the BB at the same time, the circular reads.
On the other hand, the same process will have to be followed by the boards of directors of the banks if they want to terminate appointment contracts of the CEOs.
In case of posts of CEO falling vacant, the banks have been empowered to appoint their immediate subordinate officers as acting CEOs for maximum three months and inform the central bank about the appointees.
The BB has made the latest move on the heels of allegations that some banks' authorities had forced their CEOs into retirement before expiry of their contracts.
"We want to ensure transparency of the CEO-resignation process through amending the rules," a senior BB official told the FE while explaining the main objective of the amendment.
He also said the central bank will verify the causes of resignation of the CEOs after receiving the notice before a month.
"Now both the CEOs and the boards of directors of the commercial banks are empowered to exercise their legal rights before taking final decisions," the central banker noted.
Senior bankers welcomed the BB move, saying that it will help ensure good governance in the country's banking sector.
"It will be a win-win situation for both sides," Mohammad Abdul Mannan, managing director and CEO of the Islami Bank Bangladesh Limited and vice-chairman of the Association of Banks, Bangladesh (ABB), told the FE.
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